German Industrial Output Rose in December as Economy Improved

German industrial production rose in December, adding to signs that Europe’s largest economy is gathering pace.

Production increased 0.3 percent from November, when it fell 0.2 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.2 percent gain, according to the median of 37 estimates in a Bloomberg News survey. November output was revised down from an initially reported 0.2 percent increase. From a year earlier, production fell 1.1 percent when adjusted for working days.

The economy is rebounding from a contraction at the end of last year. Business and investor sentiment improved more than forecast in January and the unemployment rate fell to 6.8 percent, matching a two-decade low. Factory orders rose 0.8 percent in December as demand from the euro area, Germany’s biggest export market, surged 7 percent, the Economy Ministry said yesterday.

Recent indicators “lead us to expect that the German economy expanded noticeably again in the first quarter after a presumably large minus in the final quarter of 2012,” said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. “Uncertainty about the future of the monetary union and its constraining effect on investment is obviously lifting more quickly than we had previously assumed.”

Manufacturing output rose 1.2 percent in December, with investment-goods production up 1.9 percent and consumer-goods output jumping 3.9 percent, today’s report showed. Production of basic goods declined 0.7 percent and energy output dropped 3.4 percent. Construction slumped 8.9 percent from November.

Weakness Ending

While industrial production was “weak” in the final quarter of 2012, “the recovery in factory orders and the clear improvement in important confidence indicators in recent months suggest the weak phase is coming to an end,” the ministry said in an e-mailed statement.

Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, said last month it’s targeting higher sales and profit in 2013, boosted by global growth.

Infineon Technologies AG, Europe’s second-biggest chipmaker, said last week it expects first-quarter earnings to improve as demand picks up from the car industry.

German plant and machinery orders rose in December from a year earlier as euro-area demand recovered, the VDMA machine- makers’ association said this week.

ECB Rates

The European Central Bank will hold its benchmark rate at a record low of 0.75 percent when policy makers meet in Frankfurt today, according to all 60 economists in a Bloomberg survey. The decision is due at 1:45 p.m. and President Mario Draghi holds a press conference 45 minutes later.

“We foresee a gradual recovery in the second part of the year,” Draghi said on Jan. 25, adding that the ECB’s announcement of an unlimited bond-purchase program has eased market tensions. At the same time, “the jury is still out. We haven’t seen an equal momentum on the real side of the economy,” he said.

The euro-area economy, which slid into recession last year, probably stagnated in the first quarter of 2013, according to the median of 26 forecasts in another Bloomberg survey. The ECB estimates a contraction of 0.3 percent for the currency bloc this year while the Bundesbank predicts the German economy will grow 0.4 percent.

“We think that it is a bit too early to raise the green flag,” said Andreas Rees, chief Germany economist at UniCredit Research in Munich. “But the upswing is coming soon, in the course of the first quarter, and may well surprise on the upside.”

To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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